BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 923|
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                                   THIRD READING 


          Bill No:  SB 923
          Author:   Hernandez (D) 
          Introduced:1/28/16  
          Vote:     21 

           SENATE HEALTH COMMITTEE:  7-0, 3/30/16
           AYES:  Hernandez, Hall, Mitchell, Monning, Pan, Roth, Wolk
           NO VOTE RECORDED:  Nguyen, Nielsen

          SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

           SUBJECT:   Health care coverage:  cost sharing changes


          SOURCE:    Author
          
          DIGEST:  This bill prohibits a health plan contract or health  
          insurance policy from changing any cost sharing requirements  
          during the plan or policy year, except when required by a change  
          in state or federal law. Applies this prohibition to  
          non-grandfathered health plan contracts and health insurance  
          policies in the individual and small group markets and  
          grandfathered health plan contracts and insurance policies in  
          the individual market that are issued, amended, or renewed on or  
          after January 1, 2017.

          ANALYSIS:  

          Existing law:

          1)Establishes the Department of Managed Health Care (DMHC) to  
            regulate health plans and the California Department of  
            Insurance (CDI) to regulate insurers, including health  








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            insurers. 

          2)Prohibits a health plan or health insurer, with regard to  
            group contracts, from changing the premium rates or applicable  
            copayments, coinsurances or deductibles for the length of the  
            contract, except, when authorized or required in the contract,  
            when the contract is a preliminary agreement subject to  
            execution of a definitive agreement, or when the plan and  
            contract-holder mutually agree in writing. (Enacted prior to  
            the Affordable Care Act [ACA]).

          3)Defines rating period for the individual market as the  
            calendar year for which premium rates are in effect, and for  
            the non-grandfathered small group market as the period for  
            which premium rates established by a plan are in effect and  
            are no less than 12 months from the date of issuance or  
            renewal of the plan contract.  (Enacted after the ACA) 

          This bill:

          1)Prohibits a health plan contract or health insurance policy  
            from changing any cost sharing requirements during the plan or  
            policy year, except when required by a change in state or  
            federal law.  

          2)Applies 1) directly above to non-grandfathered health plan  
            contracts and health insurance policies in the individual and  
            small group markets and grandfathered health plan contracts  
            and insurance policies in the individual market that are  
            issued, amended, or renewed on or after January 1, 2017.

          3)Defines cost sharing as any copayment, coinsurance,  
            deductible, or any other form of cost sharing by the enrollee  
            other than the premium or share of premium.

          4)Defines plan year and policy year as the meaning set forth in  
            federal regulations.  Defines plan or policy year for  
            non-grandfathered health plan contracts and health insurance  
            policies in the individual market as the calendar year.

          Comments
          
          1)Author's statement.  According to the author, the ACA provides  
            many new consumer protections to make health insurance more  







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            affordable and available. These include protections on  
            cost-sharing, such as actuarial value requirements and placing  
            annual limits on out-of-pocket costs. One of the many  
            individual market reforms California enacted while  
            implementing the ACA was a provision that prohibited plans and  
            insurers from altering premiums during the plan year. This  
            essential patient protection, while meaningful on its own,  
            does not currently apply to cost sharing requirements across  
            all markets. This bill will ensure health care consumers are  
            actually provided what they were promised when signing up for  
            coverage by prohibiting a health care service plan contract or  
            health insurance policy from changing any cost sharing  
            requirements during the plan year. Numerous consumer  
            protections passed by California over the last several years  
            were designed to put an end to "bait and switch" tactics  
            previously employed by health plans and insurers. This bill  
            continues that tradition by advancing the basic tenet that  
            consumers should get what they pay for. 

          2)Health Insurance and the ACA.  The health insurance market is  
            segmented into group and nongroup markets.  In the group  
            market there are companies that issue health insurance plans  
            or policies to large employers or small employers, or both,  
            and in the nongroup market plans or policies are issued to  
            individual purchasers who buy insurance for themselves and/or  
            their family members. Both small group and individual  
            insurance plans or policies are available for purchase in  
            health benefit exchanges and outside health benefit exchanges  
            (Covered California in this state). The laws that apply to  
            specific market segments are not always the same. 

            The ACA represents a major expansion of U.S. health care  
            coverage through an expansion and simplification of the  
            Medicaid program and the adoption of major reforms of the  
            health insurance market. Most transformational are changes to  
            the small group and individual insurance markets, such as  
            mandating guaranteed issuance of coverage, eliminating  
            pre-existing condition exclusions, and limiting factors upon  
            which premium rates can be developed. The ACA requires  
            carriers to provide essential health benefits with  
            standardized tiers of cost-sharing. Under the ACA,  
            out-of-pocket limits for health plans are subject to the limit  
            that currently applies to health savings account-qualified  
            health plans.  ACA regulations on grandfathered plans or  







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            policies address how health plans or policies can retain a  
            "grandfathered" exemption from certain ACA requirements. Some,  
            but not all, of the ACA requirements apply to grandfathered  
            plans or policies, and there are differences in requirements  
            that apply to grandfathered large group, small group, and  
            nongroup plans or policies.

            The ACA requires health plans and insurers offering  
            non-grandfathered health plans or policies inside and outside  
            of health benefit exchanges in the individual and small group  
            markets to assure that any offered product must meet distinct  
            levels of coverage called "metal tiers." Each metal tier  
            corresponds to an actuarial value, calculated based on the  
            cost-sharing features of the plan.  Actuarial value is the  
            percentage of health care costs that would be paid for by a  
            person's health plan or policy coverage, versus out-of-pocket  
            costs at the point of service (e.g., co-payments, co-insurance  
            or the deductible).  For example, a health plan or policy with  
            an actuarial value of 60% would pay for 60% of an average  
            individual's health care costs (using a standard population),  
            while the individual would be responsible for the remaining  
            40%.  Federal law, effective 2014, requires health plans and  
            health insurers to categorize products based on actuarial  
            value as follows: Bronze - 60%, Silver - 70%, Gold - 80%, and  
            Platinum - 90%.

            For both small group and individual group plans or policies,  
            California law establishes either a 12 month or calendar year  
            rating period meaning rates have to be based on a 12 month  
            period. Prior to the ACA, California law already prohibited in  
            group contracts, plans and policies which allowed changing the  
            premium rates, copayments, coinsurances or deductibles for the  
            length of the contract, with certain exceptions, like the  
            parties to the contract agree in writing.  The law was passed  
            because a health plan changed the premium rates after the open  
            enrollment period closed.  The law applies only to large group  
            plans and policies, and grandfathered small group plans and  
            policies. According to an article in the Los Angeles Times, in  
            October of 2015, a major health plan settled an $8.3 million  
            lawsuit that was brought because in 2011 the company was  
            altering deductible requirements mid-year. As part of the  
            settlement the plan assumed no wrong doing and argued that  
            neither state law nor their existing contracts prohibited this  
            practice. There were 50,000 affected consumers including one  







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            individual who received a $19,000 award because the individual  
            had paid particularly high out-of-pocket costs.  Affected  
            consumers stated that they felt their plan was changing the  
            rules of the game in the middle of that game. SB 923 would  
            apply to all individual market plans and policies as well as  
            non-grandfathered small group plans and policies.

          Prior Legislation
          
          SB 639 (Hernandez, Chapter 316, Statutes of 2013) placed in  
          California law, provisions of the ACA relating to out-of-pocket  
          limits on health plan enrollee and insured cost-sharing, health  
          plan and insurer actuarial value coverage levels and  
          catastrophic coverage requirements, and requirements on health  
          insurers with regard to coverage for out-of-network emergency  
          services.  Applies health plan enrollee and insured  
          out-of-pocket limits to specialized products that offer  
          essential health benefits.

          ABX1 2 (Pan, Chapter 1, Statutes of 2013) and SBX1 2 (Hernandez,  
          Chapter 2, Statutes of 2013) established health insurance market  
          reforms contained in the ACA specific to individual purchasers,  
          such as prohibiting insurers from denying coverage based on  
          preexisting conditions; and make conforming changes to small  
          employer health insurance laws resulting from final federal  
          regulations.

          SB 961 (Hernandez of 2012) and AB 1461 (Monning), were identical  
          bills that would have reformed California's individual market  
          similar to the provisions in SBX1 2.  SB 961 and AB 1461 were  
          vetoed by Governor Brown.

          AB 1083 (Monning, Chapter 854, Statutes of 2012) established  
          reforms in the small group health insurance market to implement  
          the ACA.

          SB 951 (Hernandez, Chapter 866, Statutes of 2012) and AB 1453  
          (Monning, Chapter 854, Statutes of 2012) designated the Kaiser  
          Small Group HMO as California's benchmark plan to serve as the  
          essential health benefit standard, as required by federal health  
          care reform.  

          SB 51 (Alquist, Chapter 644, Statutes of 2011), established  
          enforcement authority in California law to implement provisions  







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          of the ACA related to medical loss ratio requirements on health  
          plans and health insurers and enacted prohibitions on annual and  
          lifetime benefits.  

          AB 2244 (Feuer, Chapter 656, Statutes of 2010), required  
          guaranteed issue of health plan and health insurance products  
          for children beginning in January 1, 2011.

          SB 900 (Alquist, Chapter 659, Statutes of 2010, and AB 1602  
          (Perez, Chapter 655, Statutes of 2010), established the  
          California Health Benefit Exchange.

          AB 2052 (Goldberg, Chapter 336, Statutes of 2002), prohibited a  
          group health plan or health insurer from making any change in  
          premium rates or cost sharing after acceptance of a contract or  
          after the annual open enrollment period.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes

          SUPPORT:  (Verified  4/18/16)

          American Federation of State, County and Municipal Employees,  
          AFL-CIO
          California Association of Health Underwriters
          California Labor Federation 
          California School Employees Association
          California State Council of the Service Employees International  
          Union
          California Optometric Association
          Consumers Union
          Health Access California
          Independent Insurance Agents and Brokers of California
          National Association of Insurance and Financial Advisors
          National Association of Social Workers-CA Chapter
          National Multiple Sclerosis Society - CA Action Network
          Western Center on Law and Poverty

          OPPOSITION:(Verified  4/18/16)

          None received


          ARGUMENTS IN SUPPORT:     Consumers Union writes that if enacted  







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          this bill would confer on policyholders the stability that comes  
          with knowing that the health plan consumers diligently  
          researched, and which they determined they could afford and  
          would cover their needs, will remain the same plan throughout  
          the year until at least the next open enrollment period.  In so  
          doing, consumers will have the ability to make informed  
          purchasing decisions that will remain valid throughout the plan  
          or policy year. Health Access California writes that this is a  
          clean-up measure and that it was always the intent that both  
          premiums and cost sharing be stable for a year at a time.  
          California patients deserve this basic security. The National  
          Multiple Sclerosis Society - CA Action Network writes that  
          individuals who enroll in a health insurance plan depend on the  
          cost sharing information provided by the insurer to plan and  
          budget for their annual out-of-pocket expenses for medical  
          services and prescription drugs.  Consumers are surprised and  
          unprepared when cost sharing increases in the middle of the  
          contract year. 


          Prepared by:  Teri Boughton / Health / (916) 651-4111
          4/20/16 15:43:41





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